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The expectations on a repo rate cut have been tempered with hike in cash reserve ratio (CRR), Icra said in a note. "A demand-led collapse in bond yields over the last two weeks appeared to be signaling an imminent repo rate cut, with 10 year G-sec yields having fallen below the repo rate last week.
However, this inversion has got corrected with the CRR-hike boosting bond yields," the rating agency said. With increased CRR requirements, the excess liquidity has been largely neutralised. The yields on the 10-Year G-Sec increased to over 6.4 per cent today as against a low of 6.19 per cent on November 24. Post discontinuation of the Rs 500 and Rs 1,000 notes as legal tender from November 9, the banks have witnessed net inflows of Rs 5.94 lakh crore in deposits till November 27 2016. RBI had on November 26 announced that the banks will need to maintain as a temporary measure 100 per cent CRR on the incremental net demand and time liabilities (NDTL) between September 16 and November 11, 2016, resulting in absorption of Rs 3.38 lakh crore.
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